Why Kyle Bass Thinks China is “Just a Paper Tiger”

(Bloomberg) -- This week on “What'd You Miss This Week”, Scarlet Fu, Joe Weisenthal, Caroline Hyde, and Romaine Bostick, spoke with Kyle Bass, founder and Chief Investment Officer at Hayman Capital Management. The hedge fund manager said he is sticking with his call for a recession in 2020 as the tax cut bump fades.  "Economic activity will begin to wane in the back half of 2019, and by the middle of 2020, we're most likely going to be in a recession," he said. Bass said the Federal Reserve would not be much help --giving them an "F" score for raising interest rates too late in the cycle. “When we get into even a small recession I don’t think we have the arrows in the quiver.”

Bass also discussed his recent piece for Bloomberg Opinion arguing that President Trump should not "take the easy way out" when it comes to trade negotiations with Beijing. "There is speculation that Trump has told his negotiators to 'get a deal done' in order to put an end to recent market volatility," he wrote. "But that would mean foregoing a historic opportunity to come to a major restructuring of America’s relationship with China at a moment when China is most inclined to agree to concessions." Bass said there was an 80-to-85 percent chance that the U.S. and China would reach a deal.

Scarlet Fu sat down for an exclusive interview with Anwar Ibrahim. After spending almost a decade in prison in his native Malaysia, he is now the head of the country's ruling party and it's Prime Minister-in-waiting. Anwar said Malaysia "will not compromise" in its negotiations with Goldman Sachs over the 1MDB scandal and that the investment bank "must bear responsibility." It is "not feasible" that top executives at Goldman were unaware, Anwar said.

Goldman Sachs commented to Bloomberg after the interview. “The 1MDB bond offerings were designed to raise money to benefit Malaysia, and 100% of the net proceeds from the transactions were deposited into 1MDB accounts," a spokesperson for the bank said. "Not a cent of those funds ever passed through any account controlled by Goldman Sachs, and none of the funds were moved or redirected under our authority."

Then Brad Setser, senior fellow at the Council on Foreign Relations, came on to talk about the Euro area missing the mark. Industrial production fell at the fastest pace since the financial crisis this week, and now the 19-nation Eurozone is at risk of barely topping 1-percent growth this year. Setser gave his prescription for the economic slump and said that there is clear argument for a German fiscal stimulus. "For a long time, there has been a case for Germany to spend more largely to help its neighbors," Setser said. "Now there is a domestic case for the stimulus as well."

To contact the editor responsible for this story: Tim Andreacci at tandreacci@bloomberg.net

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